Leasing a car is an appealing option for many drivers. You get to enjoy a brand-new vehicle every few years with lower monthly payments than a purchase loan. But while leasing can feel simple, the insurance requirements are anything but.
Unlike owning a car outright, leasing comes with additional coverage expectations set by the lender. If you don’t understand these rules, you could face expensive gaps in coverage—or even risk breaking your lease agreement.
Here’s what every driver needs to know before signing a lease.
Why Insurance Rules Are Stricter for Leased Cars
When you lease a car, you don’t actually own it—the leasing company does. That means they want to protect their investment. If the car is damaged, stolen, or totaled, they don’t want to be left covering losses.
Because of this, lease contracts almost always require drivers to carry higher levels of insurance than state minimums.
The Basics: Liability Coverage
Every driver must carry liability insurance, but with a lease, the limits are usually higher than what your state requires.
State minimums can be as low as $25,000 per person for bodily injury.
Lease requirements are often $100,000/$300,000 for bodily injury and $50,000 for property damage (sometimes written as 100/300/50).
This ensures that if you cause an accident, there’s enough coverage to pay damages without putting the leasing company at risk.
Collision and Comprehensive Coverage
Liability insurance only covers other people. To protect the leased vehicle itself, lenders also require:
Collision Coverage: Pays for damage to your car in an accident, regardless of fault.
Comprehensive Coverage: Covers non-collision damage, like theft, fire, vandalism, or storm damage.
Together, these two protect the car’s physical value, which is what matters most to the leasing company.
Gap Insurance: The Often-Overlooked Requirement
One of the most important add-ons for leased vehicles is gap insurance. Here’s why:
Cars depreciate quickly, especially in the first few years.
If your leased car is totaled, your standard insurance payout only covers its market value.
But you could still owe the leasing company more than that amount under your lease contract.
Gap insurance covers the difference between the payout and what you still owe—so you’re not stuck paying for a car you can no longer drive.
Many lease agreements already include gap coverage, but not all do. Always double-check before you sign.
Other Possible Requirements
Depending on the leasing company, you may also encounter:
Deductible Limits: Some lenders require deductibles under a certain amount (often $500–$1,000).
Proof of Insurance: You may need to provide proof of coverage before you can drive the car off the lot.
Continuous Coverage: Letting coverage lapse, even for a day, can violate your lease agreement.
How Leasing Insurance Differs From Buying
Higher Minimums: Leases usually require more coverage than state laws or loan lenders.
Mandatory Gap Coverage: Often required for leases, optional when you buy.
No Flexibility: With a lease, you have less freedom to choose lower coverage levels to save money.
Tips to Avoid Gaps and Save Money
Ask for Requirements in Writing: Get the leasing company’s insurance minimums before signing the contract.
Bundle Coverage: Combine auto and home or renters insurance for discounts.
Shop Around: Different insurers price leased car policies differently—comparison shopping matters.
Confirm Gap Coverage: Don’t assume it’s included; add it if needed.
Review Annually: As your lease continues, check if better rates are available without reducing coverage.
Real-World Example
Jordan leases a new SUV with a contract requiring 100/300/50 liability coverage, collision, comprehensive, and gap insurance. Six months later, the SUV is totaled in an accident.
Insurance pays $28,000 for the vehicle’s market value.
Jordan still owes $32,000 on the lease.
Without gap insurance, he’d be on the hook for the $4,000 difference.
With gap coverage, the balance is paid, and Jordan walks away without debt.
Final Thoughts
Leasing a car can be a smart financial move, but only if you understand the insurance requirements that come with it. Standard state minimums won’t cut it—you’ll need higher liability limits, full coverage, and often gap insurance.
The best way to protect yourself is to:
Review your lease agreement carefully.
Confirm coverage requirements with your insurance provider.
Make sure you’re not overpaying by comparing quotes.
Leasing gives you the keys to a new car, but the right insurance keeps you protected from unexpected bumps in the road.
